Succession planning for ‘The Firm’

17 June 2022

The appearance of Prince Charles at last month’s State Opening of Parliament is the latest event where other members of the Royal Family have taken over duties previously carried out by the Queen herself. The Palace has made it clear that this does not herald the beginning of a Regency where Prince Charles takes over royal powers, but it is obvious that we are seeing a process where the Queen is handing over the baton (sceptre?) to her children and grandchildren.

An organised handover

It is not just the royal firm for whom succession planning is important. Most people who have created a successful business or worked hard to survive difficult times will have views on what should happen to their wealth after their death. Even if it is no longer practical to run a family organisation full-time, matriarchs or patriarchs often feel a desire or responsibility to remain involved in a meaningful way while preparing the ground for a future without them.

In the case of the Royal Family, this process seems to involve the sharing of responsibilities more widely, giving other royals experience while the Queen remains a visible and engaged figure. This can be a good model for non-royal families too. There is a real skill to finding a balance between retaining control and preparing your succession; and planning in advance can make a big difference.

Family matters

To be effective, succession planning needs to take account of specific family dynamics. You may be very comfortable with your eldest son and daughter inheriting your wealth because you trust them to look after it wisely, but if your younger son is not good with money and has been subject to legal action, you may not want him to have access to a large lump sum or any control over the family business. Similarly, if one of your grandsons has fallen out with the family and moved overseas, you probably don’t want him to have a day-to-day role in the firm but may still wish to provide for him.

There is a range of ways you can balance such concerns. For example, you might consider transferring shares in a family trading company into a trust, so your family can receive distributions but do not have the power to force a sale. Issuing different share classes can also be effective – you can retain majority voting powers while giving away the right to receive future dividends or growth.

An effective structure

For large or very wealthy families it can be helpful to create a family charter – a kind of shareholder agreement that dictates how collective wealth should be shared and decisions should be made after your death.

Alongside formal structures, it is very important to expose your family to the practicalities of managing wealth early. Teenagers may not be interested in meeting your investment manager today, but the experience can make them much better prepared when they have to take control later.

Whether or not you live in a palace, thinking ahead can make succession much easier for your family. Putting the right structure in place now ensures that your wealth will be dealt with in the right way after you die, and exposing your family to how you manage your wealth will help equip them to handle money sensibly. The right planning can even help deal with unforeseen family disputes, such as younger siblings and their partners falling out irreconcilably.

For more information, please get in touch with Andrew Robins or your usual RSM contact.